Nonprofit organizations exist to meet specific needs within our communities, and in order to meet those needs they must meet difficult financial and operational requirements and standards. Unlike for-profit businesses, which operate on investments and credit, a nonprofit’s funding exists primarily of donor contributions. This means that finances may be unpredictable, and financial awareness within the organization is often low.
Fortunately, non-profit fund accounting software can create better financial awareness and management within the organization. Besides the benefit of being able to accurately track every dollar and cent that goes in and out of the organization, fund accounting software offers many benefits that make it well worth the investment.
Fund Accounting Software Helps Prioritize
Non-profit organizations often have to prioritize expenditures. As disheartening as it may be for leadership, some programs, promotions and campaigns are simply out of reach for these groups. That is, so long as they aren’t able to properly manage their funds. With fund accounting software, a nonprofit organization can know in real time the status of the organization’s funds and can help when it comes to prioritizing certain projects over others. For example: a year-end festival that garners quite a few seasonal donations and engaged supporters may take precedence over a high effort small return campaign such as selling cards. Such decisions can be difficult to make, but with the right software the return on investment can be calculated more objectively.
Fund Accounting Software Makes Tax Compliance Easy
While non-profit organizations are generally exempt from income or property taxation, organizations which exceed a certain threshold in gross receipts must file Form 990 with the IRS. Having the ability to track gross receipts in a fund accounting software system can certainly provide some peace of mind to the accounting manager of the organization. A number of fund accounting packages have the capability of producing the Form 990 from within the software while others may simply produce the supporting information for the organization to file the form.
Fund Accounting Software Produces Meaningful Reports
One of the top components that a nonprofit organization seeks in a fund accounting software is the ability to provide meaningful reports to various stakeholders in the organization. A solid fund accounting software is capable of enabling the accounting department to generate reports that are of interest to the organization’s board of directors, executive director, program managers and other interested parties. While a software package might have a slick user interface for inputting and maintaining organization transactions, it will fall short of expectations if it cannot produce meaningful reports.